Massachusetts pols raise immediate concerns with Trump tax overhaul

By Matt Murphy /STATE HOUSE NEWS SERVICE

Thursday

Sep 28, 2017 at 11:39 AMSep 28, 2017 at 11:46 AM

STATE HOUSE, BOSTON, SEPT. 28, 2017......President Donald Trump is newly pitching a massive federal tax code overhaul as a middle-class tax cut that would level the playing field for American business, but Democrats are pushing back against what Sen. Elizabeth Warren described as "warmed-over" Republican trickle down economics.

Trump and Republican leaders in Congress are trying to turn the page from their failed repeal of Obamacare by charging into a debate over a tax system that the White House said was "rigged against hardworking Americans."

Trump called the tax reform framework, which included a slashing of the corporate tax rate to 20 percent, "the largest tax cut, essentially, in the history of our country."

"We want tax reform that is pro-growth, pro-jobs, pro-worker, pro-family, and, yes, tax reform that is pro-American," Trump said at a rally in Indiana. "It's time to take care of our people, to rebuild our nation, and to fight for our great American workers."

The introduction of Trump's plan will likely sent Congress into a debate this fall over tax policy while in Massachusetts policy analysts are mulling over the impacts of reductions in the sales tax rate and a new surtax on household income above $1 million, both proposals that may appear on the 2018 ballot.

The Trump plan calls for reducing the number of tax brackets from seven to three -- 12 percent, 25 percent, and 35 percent. While the highest income earners currently pay 39.6 percent on income, the GOP framework allows for a possible fourth bracket to ensure the wealthiest American don't pay a smaller share of their income than they do today.

The increase in the lowest tax bracket from 10 percent would also be offset, according to the administration, by a doubling of the standard deductions to $12,000 for an individual and $24,000 for a married couple, and an increase in the child tax credit.

The framework did not specify the income ranges that would fit into each tax bracket, leaving major questions about how the plan would impact Massachusetts families, according to one accountant.

Mark Nichols, a principal with Landmark Financial Services in Andover, said an increase in the standard deduction combined with the elimination of other personal exemptions and deductions turn out to be offsets for many taxpayers.

"It sounds good, but it may not really be a huge windfall," he said.

The businesses tax cuts could lead to higher taxable profits, payrolls and investments that could be a boon to the Massachusetts economy, he said, as long as those increased profits get reinvested in workers and the broader economy.

Trump has had difficulty over his first months in office shepherding major proposals through a closely split Congress, but his administration indicated out of the gate that it had developed the tax reform framework in cooperation with the House Ways and Means and Senate Finance committees.

Still, without a plan to pay for the tax cuts and many of the details in the proposal left to Congress to sort out, tax reform will not be an easy sell.

"The 'new' Republican tax plan is the same warmed-over, trickle-down plan they've been pushing for decades. It delivers massive tax cuts to millionaires and giant corporations and kicks working families to the curb," U.S. Sen. Elizabeth Warren said.

Warren singled out the elimination of the state and local tax deduction and the proposed repeal of the estate tax as areas of concern, as well as the proposal's potential to "explode the deficit" or lead to calls from Republicans for the cutting of Medicaid, Medicare and research funding.

U.S. Rep. Richard Neal, a Springfield Democrat and the ranking minority member of the Ways and Means Committee, also said the plan would benefit the rich, and criticized the lack of key details in the nine-page framework released by the White House.

"This tax plan would give big tax cuts to the wealthiest Americans, helping the rich get richer while leaving behind working families and middle-class Americans. Not only that, their plan would also explode our nation’s deficit by believing that tax cuts pay for themselves – something that respected economists on both sides of the aisle know is simply not true or borne out by any facts," Neal said in a statement.

The White House said it wants to eliminate most itemized tax deductions to simplify the code, but will retain deductions for home mortgage interest and charitable donations.

Gov. Charlie Baker urged his fellow Republicans in Washington to work with a bipartisan groups of legislators to pursue tax reform, but, like Warren, expressed some concerns with the initial framework.

"While there are significant concerns about the impact the repeal of the state and local tax deduction would have on Massachusetts’ families, the administration looks forward to further details of the plan as this process begins," Baker press secretary Billy Pitman said in a statement.

On the business side, the maximum tax rate on a small and family owned business would be capped at 25 percent, while the corporate rate would be reduced to 20 percent, below the 22.5 percent average for industrial nations. Republican leaders also want to remove tax incentives that prompt businesses to stash profits overseas, opening the door to the repatriation of trillions into the US economy.

Trump said a 20 percent corporate tax rate was a "red line" for him, and he considered starting negotiations even lower at 15 percent. "Twenty is my number. So I'm not negotiating that number. I really -- I am not going to negotiate," Trump said.

Linda Moore, the president and CEO of the TechNet, said the tax reform plan would provide a "needed jolt" to the economy and spur a "new wave of innovation and investment." She also said it would encourage businesses to bring $3 trillion in overseas earnings back to the United States where that money could be reinvested.

"It will serve notice to our foreign competitors that American is stepping up its economic game by slashing the corporate tax rate and bringing it in line with the rates of other developed nations," Moore said.

The Concord Coalition, a centrist, nonpartisan group co-founded in 1992 by the late Sen. Paul Tsongas, expressed its concerns about the impact of Trump's plan on the nation's deficit.

Concord Coalition Executive Director Robert Bixby said simplification of the tax code by eliminating most deductions is a "positive goal," but would likely not be enough to offset the proposed rate cuts.

"Unfortunately, the new framework for revamping the tax code doesn’t contain much new information about how the proposed tax cuts would be financed," Bixby said. "That’s the critical question. Elected officials are touting all the goodies in terms of tax cuts and lower rates while leaving the trade-offs hidden and which taxpayers would be affected unspecified. That’s hardly a model for legislative responsibility."